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Christopher Elvin Head of Private Equity, Preqin KPMG Private Equity Forum, November 2016 Private Equity Update

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  • Christopher ElvinHead of Private Equity, Preqin

    KPMG Private Equity Forum, November 2016

    Private Equity Update

  • www.preqin.com

    About PreqinPrivate Equity & Venture Capital Hedge Funds Real Estate Private DebtInfrastructure

    Natural Resources

    San Francisco New YorkLondon

    Hong Kong

    ManilaSingapore

    Clients include over 44,000 industry professionals from 16,000 firms

    Multi award-winning service

    Data available via online databases, publications and research reports

  • www.preqin.com

    Market Overview

  • www.preqin.com

    Private Capital has evolved

  • www.preqin.com

    Private Capital Assets Under Management - $4.4tn as at March 2016

    292 370 398 396 398549

    790 9931066 1055 984 1003 949

    1216 1244 13871468

    409 367 353456 543

    661

    881

    1241 11881396 1767

    2026 2329

    2559 27072887 2906

    0

    500

    1000

    1500

    2000

    2500

    3000

    3500

    4000

    4500

    5000

    Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Mar-16

    $bn

    Dry Powder ($bn) Unrealised value ($bn)

    Source: Preqin Private Equity Online

  • www.preqin.com

    Alternative Assets – No Longer Alternative!

    Source: Preqin H2 2016 Investor Outlook

  • www.preqin.com

    Distinct Investor MotivationsHas PE delivered vs. LPs’ expectations?

    Source: Preqin H2 2015 Investor Outlook

  • www.preqin.com

    All Private Equity Strategies Median Net IRRs and Quartile Boundaries

    Source: Preqin Private Equity Online

    -5

    0

    5

    10

    15

    20

    25

    30

    35

    40

    45N

    et IR

    R (%

    )

    Vintage Year

    IRR Q1 IRR Median IRR Q3

  • www.preqin.com

    PrEQIn Index, 2000 - 2015

    Source: Preqin Private Equity Online

    0

    100

    200

    300

    400

    500

    600

    Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15

    Inde

    x Re

    turn

    (reb

    ased

    to 1

    00 a

    s of 3

    1 De

    c 20

    00)

    All Private Equity Buyout Venture Real Estate Fund of Funds Distressed Private Equity S&P 500 Index

  • www.preqin.com

    Returns by Asset Class – Pension Funds (as of June 2016)

    Source: Preqin Private Equity Online

    -10%

    -5%

    0%

    5%

    10%

    15%

    1 year 3 Years 5 Years 10 Years

    Listed Equity Fixed Income Hedge Funds Total Investment Portfolio Private Equity Real Estate

  • www.preqin.com

    Private Equity Capital Calls & Distributions, 2000 – 2016 (March)

    11468 68 85

    115135

    174

    271

    211

    156

    223 239249

    219

    284319

    789245 40 45

    115 130170

    250

    95 110147

    264 266291

    429462

    125

    -200

    -100

    0

    100

    200

    300

    400

    500

    Dec-

    00

    Dec-

    01

    Dec-

    02

    Dec-

    03

    Dec-

    04

    Dec-

    05

    Dec-

    06

    Dec-

    07

    Dec-

    08

    Dec-

    09

    Dec-

    10

    Dec-

    11

    Dec-

    12

    Dec-

    13

    Dec-

    14

    Dec-

    15

    Mar

    -16

    Capi

    tal C

    alle

    d/ D

    istrib

    uted

    ($bn

    )

    Capital Called ($bn) Capital Distributed ($bn) Net Capital Distributed ($bn)

    Source: Preqin Private Equity Online

  • www.preqin.com

    Global PE Fundraising

    684

    548

    436 403

    608

    759

    906

    1005 997

    704 738

    848 862935

    1013930

    730

    207135 101 74

    137

    248

    350413 408

    208 173213 225

    309347 331 296

    0

    200

    400

    600

    800

    1000

    1200

    2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

    Aggr

    egat

    e Ca

    pita

    l Rai

    sed

    ($bn

    )

    Year of Final Close

    No. of Funds Aggregate Capital Raised (bn USD)

    Source: Preqin Private Equity Online

  • www.preqin.com

    Fundraising by First-Time Fund Managers as a Proportion of All Private Equity Fundraising, 2009 - 2016

    Source: Preqin Private Equity Online

    27%26% 26%

    24% 23% 24% 23% 23%

    12%10%

    20%

    11%

    7%6%

    7% 7%

    0%

    5%

    10%

    15%

    20%

    25%

    30%

    2009 2010 2011 2012 2013 2014 2015 2016

    Prop

    ortio

    n of

    Tota

    l

    Year of Final Close

    No. of Funds Closed Aggregate Capital Raised

  • www.preqin.com

    Annual Global Private Capital Fundraising, 2000 – 2016YTD

    871

    718649 590

    908

    1,154

    1,391

    1,582 1,559

    1,0451,128

    1,3051,388

    1,542 1,5641,460

    1,021

    238171 135 106

    218362

    544682 708

    323 314 371424

    575 603637

    487

    0

    200

    400

    600

    800

    1000

    1200

    1400

    1600

    1800

    No. of Funds Raised Aggregate Capital Raised ($bn)

    Source: Preqin Private Equity Online

  • www.preqin.com

    Private Capital Fundraising by Fund Type, 2016 YTD

    145

    175

    97

    44

    311

    16

    90

    25

    56

    6

    55

    157

    86

    57 51 4822 20 18 15

    3 120

    50

    100

    150

    200

    250

    300

    350

    Buyout Real Estate Private Debt Infrastructure VentureCapital

    Private EquitySecondaries

    Growth NaturalResources

    Private EquityFund of Funds

    Turnaround Other

    No. of Funds Aggregate Capital Raised ($bn)

    Source: Preqin Private Equity Online

  • www.preqin.com

    Private Capital Fundraising by Primary Geographic Focus, 2000 –2016YTD

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%Pr

    opor

    tion

    of A

    ggre

    gate

    Cap

    ital

    North America Europe Asia Rest of World

    Source: Preqin Private Equity Online

  • www.preqin.com

    Private Capital Fundraising Momentum, 2008 – 2016 YTD

    Year Average No. of Months to First CloseAverage % of Target Size at

    First CloseAverage No. of Months to

    Final CloseAverage % of Target Size at

    Final Close

    2016 7 47% 16 104%

    2015 7 46% 17 101%

    2014 8 47% 16 104%

    2013 8 46% 18 98%

    2012 8 44% 17 94%

    2011 7 46% 16 97%

    2010 7 48% 18 92%

    2009 6 52% 17 80%

    2008 6 53% 15 93%

    Source: Preqin Private Equity Online

  • www.preqin.com

    Number of Private Equity Funds in Market, 2011 – Nov 2016

    0

    200

    400

    600

    800

    1000

    1200

    1400

    1600

    1800

    2000

    Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Nov-16

    No.

    of F

    unds

    Other

    Funds of Funds

    Secondaries

    Turnaround

    Growth

    Venture Capital

    Buyout

    Source: Preqin Private Equity Online

  • www.preqin.com

    Top 10 European Private Capital Fund Domicile Locations - 2010 to 2016 Vintages

    Source: Preqin Private Equity Online

    14%

    15%

    14%

    13%

    23%

    20%

    19%

    15%

    17%

    10%

    16%

    15%

    16%

    22%

    10%

    18%

    17%

    11%

    10%

    13%

    9%

    1%

    7%

    5%

    9%

    8%

    9%

    8%

    6%

    4%

    9%

    8%

    6%

    8%

    7%

    10%

    4%

    7%

    9%

    7%

    5%

    2%

    9%

    3%

    5%

    6%

    4%

    4%

    5%

    3%

    8%

    5%

    4%

    4%

    5%

    2%

    6%

    2%

    5%

    5%

    4%

    3%

    4%

    0%

    2%

    4%

    1%

    4%

    2%

    3%

    27%

    19%

    21%

    19%

    16%

    15%

    19%

    0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

    2010

    2011

    2012

    2013

    2014

    2015

    2016

    Proportion of Funds

    Vint

    age

    UK

    Luxembourg

    Guernsey

    Cayman Islands

    Jersey

    France

    Germany

    Netherlands

    Delaware

    Spain

    Other

  • www.preqin.com

    PE-Backed Buyout Deals, 2007 – 2016 YTD

    0

    50

    100

    150

    200

    250

    300

    350

    0

    200

    400

    600

    800

    1,000

    1,200

    1,400

    2007

    Q1

    2007

    Q2

    2007

    Q3

    2007

    Q4

    2008

    Q1

    2008

    Q2

    2008

    Q3

    2008

    Q4

    2009

    Q1

    2009

    Q2

    2009

    Q3

    2009

    Q4

    2010

    Q1

    2010

    Q2

    2010

    Q3

    2010

    Q4

    2011

    Q1

    2011

    Q2

    2011

    Q3

    2011

    Q4

    2012

    Q1

    2012

    Q2

    2012

    Q3

    2012

    Q4

    2013

    Q1

    2013

    Q2

    2013

    Q3

    2013

    Q4

    2014

    Q1

    2014

    Q2

    2014

    Q3

    2014

    Q4

    2015

    Q1

    2015

    Q2

    2015

    Q3

    2015

    Q4

    2016

    Q1

    2016

    Q2

    2016

    Q3

    2016

    Q4

    Aggregate Deal Value ($bn)N

    o. o

    f Dea

    ls

    No. of Deals Aggregate Deal Value (bn USD)

    Source: Preqin Private Equity Online

  • www.preqin.com

    PE-Backed Buyout Exits, 2007 – 2016 YTD

    0

    20

    40

    60

    80

    100

    120

    140

    160

    180

    0

    100

    200

    300

    400

    500

    600

    2007

    Q1

    2007

    Q2

    2007

    Q3

    2007

    Q4

    2008

    Q1

    2008

    Q2

    2008

    Q3

    2008

    Q4

    2009

    Q1

    2009

    Q2

    2009

    Q3

    2009

    Q4

    2010

    Q1

    2010

    Q2

    2010

    Q3

    2010

    Q4

    2011

    Q1

    2011

    Q2

    2011

    Q3

    2011

    Q4

    2012

    Q1

    2012

    Q2

    2012

    Q3

    2012

    Q4

    2013

    Q1

    2013

    Q2

    2013

    Q3

    2013

    Q4

    2014

    Q1

    2014

    Q2

    2014

    Q3

    2014

    Q4

    2015

    Q1

    2015

    Q2

    2015

    Q3

    2015

    Q4

    2016

    Q1

    2016

    Q2

    2016

    Q3

    2016

    Q4

    Aggregate Deal Value ($bn)N

    o. o

    f Exi

    ts

    Number of Exits Aggregate Exit Value ($bn)

    Source: Preqin Private Equity Online

  • www.preqin.com

    Venture Capital Deals, 2007 – 2016 YTD

    0

    5

    10

    15

    20

    25

    30

    35

    40

    45

    50

    0

    500

    1,000

    1,500

    2,000

    2,500

    3,000

    3,500

    2007

    Q1

    2007

    Q2

    2007

    Q3

    2007

    Q4

    2008

    Q1

    2008

    Q2

    2008

    Q3

    2008

    Q4

    2009

    Q1

    2009

    Q2

    2009

    Q3

    2009

    Q4

    2010

    Q1

    2010

    Q2

    2010

    Q3

    2010

    Q4

    2011

    Q1

    2011

    Q2

    2011

    Q3

    2011

    Q4

    2012

    Q1

    2012

    Q2

    2012

    Q3

    2012

    Q4

    2013

    Q1

    2013

    Q2

    2013

    Q3

    2013

    Q4

    2014

    Q1

    2014

    Q2

    2014

    Q3

    2014

    Q4

    2015

    Q1

    2015

    Q2

    2015

    Q3

    2015

    Q4

    2016

    Q1

    2016

    Q2

    2016

    Q3

    2016

    Q4

    Aggregate Deal Value ($bn)N

    o. o

    f Dea

    ls

    No. of Deals Aggregate Deal Value (bn USD)

    Source: Preqin Private Equity Online

  • www.preqin.com

    Proportion of Venture Capital Deals (Value) by Region, 2007-2016 YTD

    73% 72% 73% 68% 67% 69% 68%62%

    51% 47%

    14% 12%14%

    14%10%

    12% 14%

    10%

    10%8%

    9% 11% 8% 12% 17% 12% 8%

    16%28%

    34%

    3% 2% 2% 3% 3% 3%3% 6% 6% 3%

    1% 1% 1% 1% 1% 1% 2% 2% 1% 2%

    1% 1% 1% 2% 1% 3% 5% 4% 4% 6%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

    Prop

    ortio

    n of

    Agg

    rega

    te D

    eal V

    alue

    North America Europe Greater China India Israel Other

    Source: Preqin Private Equity Online

  • www.preqin.com

    Venture Capital Exits, 2007 – 2016 YTD

    0

    10

    20

    30

    40

    50

    60

    0

    50

    100

    150

    200

    250

    300

    350

    400

    Q1

    2007

    Q2

    2007

    Q3

    2007

    Q4

    2007

    Q1

    2008

    Q2

    2008

    Q3

    2008

    Q4

    2008

    Q1

    2009

    Q2

    2009

    Q3

    2009

    Q4

    2009

    Q1

    2010

    Q2

    2010

    Q3

    2010

    Q4

    2010

    Q1

    2011

    Q2

    2011

    Q3

    2011

    Q4

    2011

    Q1

    2012

    Q2

    2012

    Q3

    2012

    Q4

    2012

    Q1

    2013

    Q2

    2013

    Q3

    2013

    Q4

    2013

    Q1

    2014

    Q2

    2014

    Q3

    2014

    Q4

    2014

    Q1

    2015

    Q2

    2015

    Q3

    2015

    Q4

    2015

    Q1

    2016

    Q2

    2016

    Q3

    2016

    Q4

    2016

    Aggregate Deal Value ($bn)N

    o. o

    f Exi

    ts

    Number of Exits Aggregate Exit Value ($bn)

    Source: Preqin Private Equity Online

  • www.preqin.com

    Implications for LPs and GPs

  • www.preqin.com

    LP Satisfaction with PE Returns

    7% 6%

    37%48%

    56%47%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    H2 2016 Preliminary H1 2017

    LP Intentions for PE Allocations

    Increase Allocation

    Maintain Allocation

    Reduce Allocation

    Source: Preqin Investor Interviews, June & November 2016

  • www.preqin.com

    Challenges

  • www.preqin.com

    LP Return Expectations & Views on Difficulty of Identifying Attractive Investment Opportunities

  • www.preqin.com

    GPs views on Pricing & Competition for Private Equity Transactions

  • www.preqin.com

    Alignment of Interests

  • www.preqin.com

    LP Use of Alternative Structures Increasing

  • www.preqin.com

    LPs views on Brexit

  • www.preqin.com

    GPs views on Brexit

  • www.preqin.com

    Outlook

  • www.preqin.com

    LPs’ Expected Capital Commitments & Intentions for GP Relationships

    14% 11%

    43% 50%

    43% 39%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    H2 2016 Preliminary H1 2017

    Amount of Capital LPs are looking to Invest in next 12 Months

    More Capital in Next 12Months than Last 12Months

    Same Amount of Capitalas Last 12 Months

    Less Capital in Next 12Months than Last 12Months

    14% 19%

    16%14%

    39% 40%

    14% 6%

    3%4%

    13% 19%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    H2 2016 Preliminary H1 2017

    Intentions for GP Relationships in the next 12 Months

    Not Looking to Invest inComing Year

    Only New GPRelationships

    Mostly New GPRelationships

    Mix of Re-ups and NewGP Relationships

    Mostly Re-ups, ConsiderSome New GPRelationships

    Entirely in Re-ups

    Source: Preqin Investor Interviews, June & November 2016

  • www.preqin.com

    LP Preferences – Fund Type & Geography

    25%

    4%

    5%

    8%

    9%

    11%

    12%

    13%

    20%

    21%

    40%

    0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

    Other

    Cleantech

    Natural Resources

    Mezzanine

    Secondaries

    Distressed PE

    Fund of Funds

    Growth

    Venture Capital

    Buyout - large to mega

    Buyout - small to mid-market

    Fund Types LPs View as Presenting the Best Opportunities in the Current Financial Climate

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    NorthAmerica

    Europe Asia ROW EmergingMarkets

    Other

    Regions LPs View as Presenting the Best Opportunities in the Current Financial Climate

    Source: Preqin Investor Interviews (Preliminary), November 2016

  • www.preqin.com

    GPs Timeframe for Next Fund & Amount of Capital Looking to Deploy in next 12 months

    22%

    22%

    14%

    10%

    20%

    11%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    Timeframe for Next Fund

    Not planning onlaunching anotherfundUnsure

    2018

    H2 2017

    H1 2017

    Already in Market(as of Q4 2016)

    29%

    27%

    31%

    9%3%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    Amount of Capital Looking to Deploy in the next 12 months

    Significantly LessCapital than Past 12Months

    Slightly Less Capitalthan Past 12 Months

    Same Amount ofCaptial as Past 12Months

    Slightly More Capitalthan Past 12 Months

    Significantly MoreCapital than Past 12Months

    Source: Preqin Fund Manager Survey (Preliminary) – November 2016

  • www.preqin.com

    Exit Activity Predictions

    31% 35%

    46% 41%

    23% 24%

    0%

    10%

    20%

    30%

    40%

    50%

    60%

    70%

    80%

    90%

    100%

    Private Equity Venture Capital

    How will the Exit Environment Change Over the Next 12 Months?

    Reduced Exit Activity

    No Change

    Increased Exit Activity

    Source: Preqin Fund Manager Survey (Preliminary) – November 2016

  • www.preqin.com

    Key Takeaways• PE industry has evolved and continues to grow as a result of strong long term

    performance

    • Distributions are driving LP appetite and fundraising - majority of LPs will maintain/increase allocations and reinvest capital received….

    • BUT difficult for both for LPs and GPs to find attractive investments in highly competitive markets

    • Clear current concerns – namely around valuations and performance impact

    • Still a seller’s market but wider political/financial instability may cause shifting of the scales

    • LPs are evolving and increasing in sophistication – directs/co-investments

    • Future is bright – both LPs and GPs looking to increase activity

  • www.preqin.com

    Data Sources

    • Preqin’s online services: www.preqin.com/services

    • Free reports available from www.preqin.com/research

    Request further information from [email protected]

    Follow us on Twitter: www.preqin.com/Twitter

    Find us on LinkedIn: www.preqin.com/LinkedIn

    http://www.preqin.com/serviceshttp://www.preqin.com/researchmailto:[email protected]://www.preqin.com/Twitterhttp://www.preqin.com/LinkedIn

    Private Equity UpdateAbout PreqinMarket OverviewPrivate Capital has evolvedPrivate Capital Assets Under Management - $4.4tn as at March 2016Alternative Assets – No Longer Alternative!Distinct Investor MotivationsAll Private Equity Strategies Median Net IRRs and Quartile BoundariesPrEQIn Index, 2000 - 2015Returns by Asset Class – Pension Funds (as of June 2016)Private Equity Capital Calls & Distributions, 2000 – 2016 (March)Global PE FundraisingFundraising by First-Time Fund Managers as a Proportion of All Private Equity Fundraising, 2009 - 2016Annual Global Private Capital Fundraising, 2000 – 2016YTDPrivate Capital Fundraising by Fund Type, 2016 YTDPrivate Capital Fundraising by Primary Geographic Focus, 2000 – 2016YTDPrivate Capital Fundraising Momentum, 2008 – 2016 YTDNumber of Private Equity Funds in Market, 2011 – Nov 2016Top 10 European Private Capital Fund Domicile Locations - 2010 to 2016 Vintages�PE-Backed Buyout Deals, 2007 – 2016 YTDPE-Backed Buyout Exits, 2007 – 2016 YTDVenture Capital Deals, 2007 – 2016 YTDProportion of Venture Capital Deals (Value) by Region, 2007-2016 YTDVenture Capital Exits, 2007 – 2016 YTDImplications for LPs and GPsLP Satisfaction with PE ReturnsChallengesLP Return Expectations & Views on Difficulty of Identifying Attractive Investment OpportunitiesGPs views on Pricing & Competition for Private Equity TransactionsAlignment of InterestsLP Use of Alternative Structures IncreasingLPs views on BrexitGPs views on BrexitOutlookLPs’ Expected Capital Commitments & Intentions for GP RelationshipsLP Preferences – Fund Type & GeographyGPs Timeframe for Next Fund & Amount of Capital Looking to Deploy in next 12 monthsExit Activity PredictionsKey TakeawaysData Sources